Case Study: Holding Firm on Important Contract Terms

Problem:

Client was an established company providing various tools, technologies, and marketing platforms to the direct selling industry. After over a year of hard work and effort, client was ready to execute multi-year, multi-million dollar contract with one of the larger and better-known direct selling companies in the industry.

The negotiations had gone well. Client had a great relationship with its soon-to-be client. Its attorney had been helpful. Client couldn’t imagine a better business relationship. Client prepared first draft of licensing agreement without legal counsel. Prior to using it, firm was asked to review the agreement and make sure that it would work for its purposes.

Solution:

Assign a seasoned AEGIS attorney to review, revise and negotiate the agreement using reasonable terms utilizing “consumer-friendly” language supportive of client’s goal of closing business. Also, AEGIS’ advice was to hold firm on using strong, clear language on the most critical terms of the contract. AEGIS would participate in the negotiation in a way that would not be adversarial or threatening to our client.

Result:

AEGIS was able to negotiate specific terms and conditions that would be necessary to adequately protect our client’s interests. A few months later, while rolling out its platform at a national training event, it was announced that our client’s client was soon to be acquired. The purchaser, a very successful entrepreneur, had very specific requirements about working with third-party vendors like our client. The purchase announced that it did not like the terms negotiated in our client’s agreement and would not be honoring them. The purchaser was playing hardball and clearly felt he had adequate leverage since he controlled the money. Our client’s only choice was to either walk away from a multi-million dollar deal or take a more proactive approach and compel enforcement of the contract.

Because of the tightly worded contract, there was no option but to (1) honor the contract (over $1M in guaranteed revenue over 4 years), (2) pay an early termination fee, or (3) risk litigation and a potential judgment for several million dollars. The matter was quickly settled. Client received payment in an amount substantially greater value than the then present value of the contract.

Lessons Learned:

Our clients are entrepreneurial. As an advisor, we never want our advice to get in the way of the client meeting its objectives. Our clients work day and night to advance their businesses. In this instance, the client could not afford the deal to die because of a heavy-handed contract. At the same time, this client understood that he needed to value and trust every member of his team – especially the professionals upon which he was relying for advice. We were able to do our work and, in the end, that made all the difference.